Is It Smart To Buy U.S. Bancorp (NYSE:USB) Before It Goes Ex-Dividend?

Readers hoping to buy U.S. Bancorp (NYSE:USB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Therefore, if you purchase U.S. Bancorp's shares on or after the 31st of December, you won't be eligible to receive the dividend, when it is paid on the 15th of January.

The company's upcoming dividend is US$0.52 a share, following on from the last 12 months, when the company distributed a total of US$2.08 per share to shareholders. Calculating the last year's worth of payments shows that U.S. Bancorp has a trailing yield of 3.8% on the current share price of US$54.94. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. U.S. Bancorp paid out a comfortable 46% of its profit last year.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Check out our latest analysis for U.S. Bancorp

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that U.S. Bancorp's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. U.S. Bancorp has delivered 7.8% dividend growth per year on average over the past 10 years.

Final Takeaway

From a dividend perspective, should investors buy or avoid U.S. Bancorp? U.S. Bancorp has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. U.S. Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Curious what other investors think of U.S. Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.